Why Not Start Now?

When you talk to people who are retired, frequently one of their biggest regrets is that they didn't begin saving at a younger age. They now understand that by committing to a savings program early, a person can save less and make more, compared to a person who waits a few years before getting into the game.

Here's an example:

Maria is a careful planner. She wants to retire early and have enough money to enjoy herself, so she starts saving $38.50 a week in her retirement savings plan at age 25. Her investments return an average of 6% per year. Thirty-five years later, at age 60, Maria's investments have grown to $237,456.

Andrea figures she has plenty of time to plan for the future. She doesn't get started on a savings program until age 30. She then saves $38.50 a week and her investments also return 6% per year. Thirty years later, at age 60, Andrea's investments are worth $167,423.

By getting started 5 years earlier, Maria ended up with over $70,000 more than Andrea, even though they both saved the same weekly amount and got the same investment return. The only difference was time.

Of course, you can reach your goals starting at almost any age, so don't let the examples above make you think that if you're over 40, you're stuck. However, depending on your age when you get started, you may need to:

• Save more
• Get a higher investment return
• Retire later
• Lower your goal
• Combine several of these tactics

For instance, in the example above, Andrea saved the same amount as Maria, got the same return, but ended up with less money because of the 5-year difference. If Andrea wants to end up with the same amount of money as Maria, she'll have to save more than Maria-in this case about $54.60 a week - to reach her goal. If Andrea decides she absolutely can't save that much, then she would need to get a higher investment return, or possibly continue to work (and save) past age 60, or lower her goal.

There's no free lunch here. You have to strike a balance among your savings amount, your investment return, your goal, and your time frame.

Even if you're well into your career and haven't yet started to save, remember it's never too late. Start taking advantage of your plan now and use time to your advantage. And don't get discouraged if you can't save a lot right away. Even a little can grow into a sizable amount over time, and because your plan is flexible, you can increase your contributions as your ability to save improves.